Japanese camera maker Olympus Corp. may have used investments with a well-known Bermuda hedge fund to hide more than US$1 billion in investment losses.

A former Paine Webber banker told Reuters that his former firm helped craft so-called "tobashi" schemes to allow Olympus to hide huge losses from the collapse of Japan's economy in the 1990s. Among those techniques were a series of investments with Olympia Capital International, brokered by Paine Webber.

According to the banker, who wished to be unidentified, Olympus invested hundreds of millions of dollars with Olympia. Generally investments were made in the closing days of Olympus' fiscal year, and usually earned Olympus a 33% dividend. But rather than reporting that return, Olympus would book its investment at cost and use the profit to offset older investment losses.

Olympia, which was acquired by CACEIS Investor Services four years ago, is not accused of any wrongdoing in the scheme, which was arranged by two Japanese bankers, formerly at Paine Webber, at the center of the Olympus scandal. But Olympia founder Oskar Lewnowski expressed his disbelief at the allegations.

"That doesn't sound right at all," he told Reuters. "I don't think this was ever done."

Olympus admitted last week that it has been covering up losses since the 1990s, losses that could have exceeded US$1.68 billion, one Japanese newspaper estimates.

Editor's Note

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